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The Statute of Limitations and Debt Lawsuits

Updated on August 1, 2010

You’re probably already aware of the fact that if you owe a debt and fail to pay it, your creditor can sue you. What you may not be aware of, is the fact that creditors only have a limited time period in which they can file their lawsuits before they lose the right to do so. This limited time period is known as the statute of limitations.


Debt Collection Lawsuits

Not only does each state have a different statute of limitations, each state has a different statute of limitations for different types of debt. Credit card debts, for example, are often considered “open” debts. As such, they have the shortest statutes of limitations. Promissory notes, by contrast, have a much longer time period during which a creditor may file a lawsuit. 


Contrary to popular belief, very few creditors ever sue debtors. Creditor are far more content to sell their delinquent accounts to collection agencies. If you get a court summons for an old debt you left unpaid, you can pretty much rest assured that your summon is arriving by way of a collection agency rather than the original creditor to whom you actually owed the debt. 


Once a collection agency buys a debt, however, it legally owns the account and my do with it as it pleases, within legal limit. Unfortunately, many debt collectors violate legal limits in order to increase their profit margins. One of the ways that collection agencies violate federal collection laws is by suing consumers for debts on which the statute of limitations has already expired. 


Court Judgments and You

If you receive a lawsuit on a debt when you know the statute of limitations is no longer valid, not responding to the lawsuit won’t make it go away. Quite the contrary. If you ignore the court summons notifying you that you must appear in court, the judge will automatically side in favor of the plaintiff. This means you can be legally forced, via wage garnishment, bank account garnishment or property liens, to pay a debt that wasn’t legally enforceable. The entry of a judgment, however, changes everything.


You have the right to contest a judgment after its entered into the court record, but there is no guarantee that you’ll be successful – whereas the guarantee of success is present if you use the expired statute of limitations as a defense against the original summons. 


Resetting the SOL

Keep in mind as well that the statute of limitations isn’t written in stone. You can change the statute of limitations if you make a payment. Making a payment resets the time period a creditor has to sue you. This can leave you vulnerable long after the original statute expires. Collection agencies will work hard to coerce you into submitting a payment on an old debt merely to reset the original statute of limitations and take you to court for the remaining balance. 


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